Financial Auditing Report: PwC's Role, Ethical Issues, and Principles

This report provides a comprehensive analysis of PwC's auditing practices, focusing on its role in external financial audits. It defines the purpose and nature of external audits, emphasizing the importance of fairness, trustworthiness, and reliability of financial information. The report explores PwC's social responsibilities, highlighting the need to balance profitability with ethical considerations. It also delves into ethical issues arising in auditing, such as maintaining integrity and objectivity, and identifies ethical principles at risk of breaching, including objectivity, professional competence, and professional behavior. The conclusion underscores the critical role of auditing firms in ensuring accurate financial reporting and supporting informed decision-making. The report references various books, journals, and online sources to support its findings.

Auditing

Table of Contents
INTRODUCTION................................................................................................................................3
MAIN BODY.......................................................................................................................................3
Question 1.............................................................................................................................................3
a. Justification of company selected................................................................................................3
b. Defining purpose and nature of external financial audits............................................................3
c. Interpretation of social responsibilities of auditing firm with two example................................4
Question 2.............................................................................................................................................4
a. Two ethical issues........................................................................................................................4
b. Three ethical principles at risk of breaching................................................................................5
CONCLUSION....................................................................................................................................5
REFERENCES ....................................................................................................................................6

INTRODUCTION
The term Auditing is a process of making cross examination of all the financials of the company for
a respective financial period. The main motive behind conducting audit is to assess any error or
fraud committed by the company in its business operations. With the help of Auditing process,
auditor analyses accuracy and fairness of information as provided in the final accounts. The present
report is based on PwC (PricewaterhouseCoopers) which is one of the Australia's biggest auditing
as well as accounting firm. Report will define about nature and purpose of auditing firm with
relevant examples. Furthermore, explanation related to ethical issues and principles will be provided
in line with applicable sections of Accounting Professional and Ethics Standards.
MAIN BODY
Question 1
a. Justification of company selected
PwC (PricewaterhouseCoopers) is one of the multinational company delivering professional
services with its business operations in 158 countries. It is having its headquarter in London and is
serving across the world. Currently there are 250930 number of employees working in this firm
having revenue of US$ 41.3 billion as on 2018 (PwC Wikipedia, 2019) . PwC is engaged in
different types of services including Assurance Advisory, Financial and Tax Advisory, Actuarial
Legal frameworks, Tax Controversy, Management and Strategy consultation, Data and Analytics
etc. This firm works on three basic principles i.e. being good, bold and remain part of such phase
with the aim of becoming reliable in the accounting world. Also, another main objective is to
remain ahead in the competitive world so as to pace with the society.
b. Defining purpose and nature of external financial audits
External audit of financials is a process of conducting periodical, independent as well as
systematic analysis of all the statements as prepared by the company for a specific accounting
period. The process of external audit is undertaken by third party with some specific aim as
mentioned under statue. PwC is undertaking external financial audit with main purpose of:
1. Depicting about fairness, trustworthiness and reliability of all the information as provided by
the company related to their financial business transactions (Knechel and Salterio, 2016).
2. PwC ensures each accounting record presented by the client company are containing
complete information about business operations. Also, compliance has been made while
preparation of final report in respect of all the applicable policies as laid down by the
Generally Accepted Accounting Principles.

3. It is required on part of PwC to track whether client company has made disclosure of all the
material and relevant facts about the important business transactions in their final accounts
capable of influencing decision making process.
As per the nature of external financial audit, PwC is having its main objective of detecting
all the frauds, mistakes, errors as committed while undertaking crucial business operations. It helps
PwC in identifying major errors related to technical aspects, omission and non compliance of
applicable principles done.
c. Interpretation of social responsibilities of auditing firm with two example
Social responsibility is considered as one of the most important aspect from the perspective
of reputation risk for the management of every business firm. It is the duty of auditing firm i.e. PwC
to have better understanding about all social responsibility related issues and matter along with its
impact on working of business as well. It is required to make a balance in between profitability
aspect and products as provided by the company (Hall, 2015). Example are as follows:
1. PwC is having obligation of checking whether its client company has disclosed all the price
sensitive information about its business operations which can have negative impact on the
decision making process of its shareholders.
2. Also, PwC keeps a check on financials prepared by company by conducting cross
examination so as to ensure clear and reliable picture is provided by company about its
financial position.
Question 2
a. Two ethical issues
By deleting the cash flow part in the financials, both the firms PwC and ABC Firm has to
face manipulated financials of company as presented by the client company. Thus, while performing
auditing function these auditing firms has to face ethical issues in form of:
1. Being a professional personnel, it is their responsibility to make judgement of sensitive and
moral nature in relation with business activities conducted. Due to non availability of proper
and relevant information, test of accuracy has been hampered (Griffiths, 2016).
2. Integrity is required to be maintained so as to enhance public confidence in relation of
company and its business operations. By not delivering material information decision-
making process of many shareholders gets affected and work of auditing firm as well.

b. Three ethical principles at risk of breaching
As per the provisions of 100’ series Code of Ethics for Professional Accountants and 200’
series Professional Standards, it is very much important for every business professional to adopt all
the fundamental principles viz. Integrity, due care, objectivity and professional competence. The
CEO of ABC Firm wants to focus on sales and profitability thereby deleting cash flows part so as
to avoid dilemma in between profits and cash flows. It has resulted in breaching of following ethical
principles:
1. Objectivity - As per this principle, PwC with ABC firm has to face bianess as made by
deleting part of cash flow. Being an professional person, it should not support any biasness,
conflict in respect of interest, others undue influence so as to override judgement made for
the benefit of business as well as other members (West, 2017).
2. Professional competence and due care – It is required on part of every professional to act
in diligent and ethical manner while rendering professional services by considering all the
applicable standards and norms.
3. Professional behaviour - It is duty of professional personnel to make proper and full
compliance of applicable rules, laws, regulations along with not considering any sort of
operations which discredits professional behaviour.
CONCLUSION
It can be assessed from above file that every auditing firm is required to examine financials as
prepared and presented by client company. By ensuring accuracy and fairness, it helps many
members in making crucial decision related to business as well as investment.

REFERENCES
Books and Journals
Duska, R. F., Duska, B. S. and Kury, K. W., 2018. Accounting ethics. Wiley-Blackwell.
Furnham, A. and Gunter, B., 2015. Corporate Assessment (Routledge Revivals): Auditing a
Company's Personality. Routledge.
Griffiths, P., 2016. Risk-based auditing. Routledge.
Hall, J. A., 2015. Information technology auditing. Cengage Learning.
Knechel, W. R. and Salterio, S. E., 2016. Auditing: Assurance and risk. Routledge.
Miller, W. F. and Shawver, T. J., 2018. An Exploration of the State of Ethics in UK Accounting
Education. Journal of Business Ethics. 153(4). pp.1109-1120.
West, A., 2017. The ethics of professional accountants: An Aristotelian perspective. Accounting,
Auditing & Accountability Journal. 30(2). pp.328-351.
William Jr, M., Glover, S. and Prawitt, D., 2016. Auditing and assurance services: A systematic
approach. McGraw-Hill Education.
Online
PwC Wikipedia. 2019. [Online]. Available through:
<https://en.wikipedia.org/wiki/PricewaterhouseCoopers>.